Yesterday the NC House filed a bill (HB 274) creating a Taxpayer Bill of Rights (TABOR).  The John Locke Foundation has written about this multiple times and has called for this type of limit on state spending.   Thankfully, the NC House members who filed this bill took our recommendations and filed this bill using John Locke’s recommendations.

The bill calls for four things:

  1. Limit increases in the General Fund budget
  2. Reform the budget process
  3. Establish an Emergency Reserve Trust Fund
  4. Amend the NC Constitution to establish a General Fund expenditure limit

The first point of the bill is to limit the growth of the General Fund spending by a fiscal growth factor.  This is calculated by using the average of both inflation and population change for the preceding three years.  If spending needed to be increased due to a natural disaster or special circumstance, it would require a 2/3 vote of both the Senate and House and this increase could not last longer than 12 months.

The second is to use prior calendar year collections as the revenue estimates for the next fiscal year.  Currently the state government uses calculated forecasts, which have proven to be wrong in estimating the amount of revenue the state will receive.  This method will allow legislators to property budget with more realistic numbers of what revenues will be instead of guessing what the economy will do to revenues.

The third is to create an Emergency Reserve Trust Fund.  Currently there is a Savings Reserve Account that can be used anytime the General Assembly wishes.  This bill would change the name and also require a 2/3 vote of each respective House to use these funds.  This would not cause a problem because if such a disaster or immediate requirement of funds was needed, the issue would not be political and be solely a vote in the best interest of the state.  If funds in this trust fund exceeded 5% of the General Fund appropriation, the excess funds would be returned to taxpayers.

The fourth key change this bill would create is a constitutional amendment to limit General Fund spending using the guidelines established above.  This will ensure that no matter what party is in control in North Carolina, the taxpayers won’t have to worry about spending jumping huge volumes without just cause.